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Prophecy Emerges from Rainshadow
Released 30 October 2003

Listed software multinational Prophecy International is emerging from the "Year 2000 rainshadow" with clear indications of improved trading conditions in the technology market globally, reported the company's CEO Alan Greig today.

"We are in a stronger position than in past years with new products in clearly defined markets with considerable and demonstrable demand," Mr Greig told, at the company's AGM.

"There are indications that the market is finally emerging from its Y2K rainshadow and we are well placed to take advantage of it. During the first quarter, much of our focus has been on building a sustainable pipeline for our products and the establishment of partners for basis2 - with immediate success on both counts."

In 2002-03, Prophecy International experienced the difficult trading conditions felt throughout the global IT Industry with reduced spending across the board. While revenues in Australia remained at similar levels to 2001-02, the challenging conditions in both the US and UK resulted in 48 per cent reduction in sales revenue from overseas operations.

The company reduced its cost base dramatically in the second half of the year by reducing headcount across the group while retaining a presence in the key areas of US and Europe for the launch of its new products.

During the year Prophecy continued to invest in the development of Velatte, its flagship rapid application development environment for the strongly emerging Java technology platform. This advanced technology has enabled Prophecy to secure an AusIndustry R&D Start Grant that subsidises the R&D cost at the rate of 50c for every $1 spent.

Consulting services continued to contribute strongly to revenue with the delivery of major projects on time and within budget. Projects included completion of the Emergency Services Levy project for SA Government and development of Phase One of the Water Licensing project for the Department of Water Licensing, Biodiversity and Conservation. Phases Two and Three are due to be completed in 2003-04. The successful delivery of these projects clearly testifies to the capabilities of Prophecy's e-Foundation rapid application assembly product.

In March, Prophecy acquired basis2, a technologically advanced Customer Information System (CIS) for the water and energy utility markets. The company has mounted a focused marketing campaign to promote the product in the US, UK and Asia Pacific. Leading US-based CIS industry consulting group TMG Consulting, US has reviewed basis2 and states:

"basis2 is impressive in many ways, including its Oracle application design, its email and bill presentation capability, and the flexibility and strength of its billing engine… basis2 will make an exciting impact in the CIS market."

Mr Greig said Prophecy's go-to-market plan for basis2 was through key industry and technology partners. "We have already signed partners in Australia, UK and Europe," he said. "basis2's faithful use of Oracle's development technology provides a tight integration with Oracle's e-Suite, a leading ERP software suite. The fact that basis2 offers a CIS solution that is not covered by Oracle creates significant interest with this major industry player.

"We believe 2003-04 will see Prophecy return to profitability, positive cash flow and increased shareholder value. A quarterly review completed this week supports this position."



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